Browse or Experience

Z. Eddie Ning () and J. Miguel Villas-Boas ()
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Z. Eddie Ning: UBC Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada
J. Miguel Villas-Boas: Haas School of Business, University of California, Berkeley, California 94720

Marketing Science, 2023, vol. 42, issue 2, 336-359

Abstract: Consumers gain information about the value of a product both prior to purchase and when owning a product. We consider a model where both these types of gaining information are possible. The information gained when owning the product may affect future product purchases. We characterize when the consumer chooses to purchase the product if the consumer does not own it, the expected interval of time between purchases, and the expected number of product purchases over time. We find that keeping product duration fixed, the optimal fixed price is independent of the initial product valuation if that valuation is sufficiently low such that a consumer not owning the product does not purchase it immediately and characterize how the price charged affects the consumer information gathering strategy. We also find that an increase in the information gained while using the product leads to an earlier purchase but less frequent repurchases thereafter. On the other hand, an increase in the information gained prior to purchase leads to later purchases but more frequent repurchases thereafter. When the firm can also choose product duration and there are no costs of production, we find that the firm chooses an expected product duration that is infinitely small and charges a flow price for the consumer to use the product. We also characterize how the extent of learning when owning and when not owning the product, the duration of the product, and the discount rate affect the optimal consumer and firm strategies.

Keywords: game theory; learning; search; experience goods; search goods; repurchases (search for similar items in EconPapers)
Date: 2023
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http://dx.doi.org/10.1287/mksc.2022.1382 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:42:y:2023:i:2:p:336-359

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